Which of the Following Statements About Dollarization Is Accurate

question 45

Multiple Choice

Which of the following statements about dollarization is accurate?

• A)A country that chooses to dollarize will enhance its control over its monetary policy.
• B)Dollarization decreases exchange-rate risks by removing the risks of speculative attacks on its currency.
• C)A country that dollarizes gains interest income on what had been the country's holdings of international reserve assets.
• D)Dollarization enables a country to adopt a measure countering adverse foreign shocks without disrupting the country's economy.

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Definitions:

Net Cash Flows

The amount of cash generated or used by a business during a given period, calculated as cash received minus cash spent.

Desired Rate

The target interest rate set by a company or investor for a specific investment or project.

Internal Rate

Often referred to as Internal Rate of Return (IRR), it's a metric used in financial analysis to estimate the profitability of potential investments.

Compound Interest

A method of interest computation that involves charging interest on the original loan or deposit amount as well as on any interest that has built up during past periods.